Starting a business is among the most exciting and anxious times of an entrepreneur’s life. You have so many ideas about what you want to do and how you want to change the industry and maybe the world if you’re feeling particularly ambitious. You’re also nervous thinking about all the things you have to do and all the work that goes into getting a business off the ground. There aren’t many people who are overly fond of what could be termed “administrative work”, and there is quite a lot of it that goes along with having your own business. Many business owners will put off those tasks for a later day, rationalizing that the product is the centerpiece of the entire enterprise and therefore demands all of the attention until it’s ready for market. And while having a narrow, single-minded focus can help you achieve success in the long term, ignoring important details in the beginning of your company can put you at risk for failure.
Creating your own business takes more than just willing it into existence and declaring it to the world. And while setting up a website and social media accounts for your venture can give the appearance of an official business, it’s a house built on sand without the proper business entities in place. Creating a business entity legitimizes your venture, giving you an EIN and a way to conduct business. More importantly, having a business entity can protect your personal assets in the case of professional failure.
When looking to create a business entity, it’s important to be aware of the different types of entities, and the differences between them. Money is often tight in the early stages of most startups, and the legal budget likely doesn’t have room for do-overs. To form your business entity, you can start out with an LLC, a C Corp, or an S Corp. For those not versed in the world of business law, it can be daunting to look over those options and try to decide on the right options, especially considering how costly mistakes can be. While attorney fees are a considerable expense on a shoestring budget, it can be a good investment for those looking to have the peace of mind that comes with making an informed decision on what is the foundation of their business.
You want to make sure that you’re staying on top of all the other administrative tasks from the outset as well, to avoid a painful situation down the line. Bookkeeping is few people’s favorite task, but keeping accurate records as you go is far easier work than trying to reconstruct your activities and spending from months ago as you prepare your taxes. And as you expand and look for outside investment, you’ll need well-maintained records to show investors not only an accurate accounting of your business, but also a smart, responsible entrepreneur.
Insurance is another area that is often unpleasant to consider as you get your business off the ground. Thinking about insurance is by its nature negative, because it’s taking into consideration possible misfortunes that could befall you or your business. But that doesn’t make having insurance any less prudent. Optimism will only get you so far; holding the right insurance policies will make sure your business can survive any potential setbacks.